China Slows Soybean Buying Spree as Prices Rise and Crush Margins Shrink

China’s monthslong buying binge of soybeans is slowing sharply, as global soy reserves tighten and US soybean futures trade around their highest levels since 2014. Although China’s soy imports are still well above last year’s volumes, the country’s high stocks levels for both soybeans and soybean meal mean it can temporarily ease up on imports while prices remain elevated.

High import prices also have squeezed China’s margins for soybean crushing, a key component of the agriculture industry. Crush margins drive the processing rate and determine the preferred origin for China's massive importing program. Just in the past month, Chinese crush margins on US Gulf Coast shipments have dropped sharply, although they remain positive. Margins on soybeans sourced from Brazil have plunged into negative territory in the same time period.  

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CBOT soybean futures have been driven higher by tightening supplies in both Brazil and the US, and a dry start to the South American growing season due to La Niña. Delays in planting the Brazilian crop also will likely mean the 2021 soybean export season will begin later than usual. 

China imported 8.69 million tonnes of soybeans in October, an 11.2% decline from the previous month but still 40% ahead of October 2019. Year-to-date imports are up 18% from last year. 

Brazil remained the largest supplier of soybeans to China in October. Soy shipments from the South American country to China rose 12% in October from a year earlier but were down 41.6% from the previous month. As Brazil’s domestic soybean supplies tighten, the country’s livestock and processing industries face shortages and rising prices.

Any increase in demand from China will need to be met by the US, where soybean stocks are already at seven-year lows. Although CBOT futures prices have backed off their recent highs, any pickup in Chinese buying, encouraged by the newfound strength in the yuan, or additional weather concerns out of South America could stimulate another move higher for prices. 

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